Global X ETFs has launched a new fund in the US, providing exposure to firms that stand to gain from advances in the field of genomic science.
The fund is the first passive ETF to offer pure-play exposure to the theme of genomics.
The Global X Genomics & Biotechnology ETF (GNOM US), listed on Nasdaq Exchange, invests in a range of companies linked to the genomic science theme, including those involved in gene editing, genomic sequencing, genetic medicine/therapy, computational genomics, and biotechnology.
Global X has partnered with German index provider Solactive for the launch with the fund tracking the Solactive Genomics Index.
The index includes developed market stocks with capitalizations greater than $200 million and average daily trading volumes greater than $2m.
The selection universe is refined to only include firms defined as healthcare stocks according to FactSet’s sector classification. Solactive also removes companies that do not generate at least 50% of their revenues from genomics-related businesses.
The index then utilizes Solactive’s proprietary Natural Language Processing engine called ARTIS (Algorithmic Theme Identification System) to provide potential constituents with a thematic score indicating how closely aligned the firm is to the genomics theme. ARTIS analyses large volumes of company reports, financial news, and business descriptions in calculating thematic scores.
The methodology selects the 40 stocks with the highest scores according to the ARTIS algorithm. These stocks are weighted by free float market capitalization subject to an individual floor and cap of 0.3% and 4.0% respectively. The index is rebalanced semi-annually in May and November.
Companies listed in the US account for the vast majority of the index exposure with a combined weight of 84.5%. The next largest country weights are The Netherlands (7.4%) and China (3.3%).
The ETF comes with an expense ratio of 0.68%.
The fund is the first ETF to offer passive pure-play exposure to the genomics theme, although investors may also wish to consider the actively managed ARK Genomic Revolution ETF (ARKG US). This fund will typically hold between 30 and 50 US-listed stocks or ADRs of firms linked to the genomics theme. Its expense ratio is slightly higher at 0.75%, and the ETF houses approximately $400m in AUM.
Genomics boom
According to Global X, the genomics theme is experiencing a boom. The provider points to data from Allied Market Research that estimates the DNA sequencing market to grow from $6.2 billion in 2017 to $25.5bn by 2025, representing a compound annual growth rate of 19%.
A similar study published by market intelligence provider BIS predicts the genomics technology sector to generate revenues of $140bn by 2026.
Genomics also has the potential to provide enormous societal benefits through revolutionizing the healthcare industry, as breakthroughs in genomic science can present new treatments to help patients recover from what were once believed to be incurable afflictions. Global X notes that scientists have identified more than 50,000 genetic diseases caused by single-gene mutations, many of which are likely to be treated through genomic approaches. Several of these methods have already begun to receive FDA approval.
“The wide-ranging and transformative health benefits from advancements in genomic technologies are astounding,” said Michael Hoffmann, Research Analyst at Global X. “We’re eager to see how investors engage with GNOM as a tool for accessing this disruptive theme.”